Cisco Systems Chief Executive John Chambers said the sluggish business environment would last for two quarters. The company cited weakness in demand from carrier customers, especially next-generation carriers. See full story.

Inktomi
INKT
one of the many Net infrastructure firms suffering from weak demand from carrier customers, saw shares fall 6 percent to $12.88. CacheFlow
CFLO
which makes caching appliances that speed up the downloading of Web pages, fell 11 percent to $9. The company reported a wider-than-expected recently revised loss projection. On Feb. 1, CacheFlow warned of a top- and bottom-line shortfall. While the company met its revenue numbers, it still slipped below analysts' downward revised projections.

To meet its objectives, CacheFlow said it would reduce staff by 10 to 15 percent.

Restructuring and streamlining has been the order of the day as companies prepare to operate in an economic downturn that could turn ugly. Earlier this week, EToys said it was cutting the remainder of its staff and InfoSpace said it was reducing its work force by 21 percent.

CNet
CNET, -3.19%
a leading online provider of high-tech content and shopping services, said it's reducing its global staff of 2,000 by 10 percent. Many of the layoffs are a result of the merger with ZDNet and the acquisition of MySimon, a comparison shopping property. Over the next three weeks, the company will announce which areas will be cut, said CNet CEO Shelby Bonnie.

CNet announced the news at the same time it reported fourth-quarter revenue of $120 million and earnings of $18.1 million, or 9 cents a share. Bottom-line results were in line with expectations while the top line came in just shy. More importantly, CNet's outlook was hardly uplifting. CNet management guided analysts to lower this year's revenue estimates by 20 to 25 percent to roughly $450 million. Lazard Freres & Co. analyst Mandana Hormozi lowered his '01 sales estimate from $547.2 million to $451.3 million.

Traditional advertisers, which currently make up 71 percent of the company's ad sales, should continue to make up a greater portion of sales, Bonnie said. Bonnie noted that the company's new Messaging Plus ads, often referred to as "click-within" ads, are being well received by traditional advertisers.

Buyer beware

Critical Path
CPTH
shares are still halted. On Feb. 2, the company announced that it's formed a committee to "conduct an investigation" into the firm's revenue-recognition practices" after discovering a "number of transactions that put into question" the company's financial results. While the company highlighted that its fourth-quarter sales of $52 million may be "materially misstated," analysts suspect revenue for all of last year may be combed over, as well. At least one class-action lawsuit alleges that Critical Path "embarked on a scheme to defraud investors" as early as August in order to inflate its stock price and acquire PeerLogic.

Another reason many high-tech firms are willing to aggressively recognize revenue is because they've been valued off of that, instead of earnings, observed Mary Barth, a professor of accounting at Stanford University and member of the International Accounting Standards Board.

The significance of revenue coupled with swiftly changing and ambiguous revenue-recognition policies is a dangerous combination, Barth suggested. See latest Net Sense column.

Wireless Web update ...

Palm
PALM, +0.68%
edged up 13 cents to $22.13 after Palm CEO Carl Yankowski told investors at the Banc of America Securities conference in San Francisco that he's confident the company will maintain its 66 percent market share of handheld devices, while its share of operating systems has grown substantially. See dispatches from conference.

InfoSpace
INSP, +1.82%
jumped $1.34, or 37 percent, to $5. The company said it's holding a conference call on Feb. 12 to outline its plans to return to profitability.

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